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Hi. I'm new to this whole investing thing, I'm thinking of going to a full-service broker soon and investing in my first portfolio with stocks/mutual funds. I'm just wondering, what is the minimum amount of money required to open a portfolio?
Hi. I'm new to this whole investing thing, I'm thinking of going to a full-service broker soon and investing in my first portfolio with stocks/mutual funds. I'm just wondering, what is the minimum amount of money required to open a portfolio?
This topic has been covered recently in these threads:
There is really no need to go to a full-service broker. Open an account with a discount broker with an online presence: Charles Schwab, E-Trade, ShareBuilder, and etc. Take a look at the thread, many good ideas there.
Last edited by Teak; 06-19-2009 at 08:25 PM..
Reason: addition
Hi. I'm new to this whole investing thing, I'm thinking of going to a full-service broker soon and investing in my first portfolio with stocks/mutual funds. I'm just wondering, what is the minimum amount of money required to open a portfolio?
A full-service broker is approximately the worst possible way to go about it.
Thanks Teak, but I want to go to a full-service broker, I don't have the expertise or time to manage my own investments. I don't mind paying the high comission as long as I get good returns and it's a reputable firm.
1) Because with regard to stocks, you are dealing with someone whose interests are not aligned with yours. His (the majority are men, I think) best interests lie in making trades. Your best interests may not lie with making those trades. That alone should bother you very much. In fact, it should be the deal-breaker.
2) Because with regard to mutual funds, you will be put into load funds. The 'load' is typically a 5.75% 'sales charge'. Your $1000 just became $942.50 and you haven't made a dime yet, with absolutely no reason to believe that this fund is superior to no-load funds. The load exists only for the broker to get paid, and it's by percentage, so if you invest $100000 you just barfed up $5750 for a transaction that's essentially the same from a mechanical standpoint.
3) Because many brokers are under significant pressure to put clients into stocks the brokerage is trying to get rid of.
4) Because your broker is unlikely to outperform the markets. A lot of them know far less than you realize.
5) Because the odds are excellent that you would make far more money in the long haul simply buying an index ETF that tracks an index representing the markets in which you want to be invested. The ETF will almost certainly not beat the market return, but it will almost certainly come within a very small fraction of the market return, with no action or knowledge necessary on your part. Index ETFs typically have extremely low expense ratios (far, far lower than the mutual funds your full-commission broker is likely to put you into, by the way), which means you get to keep maximum money. Anyone but a truly el cheapo broker will let you automatically reinvest its dividends.
6) Because he gets paid whether you make or lose money. So do mutual fund managers; thus the preference for the lowest possible expense ratio, so that win or lose they get the least of your money. "But," you may ask, "surely he will want to do well to keep me as a client." Not unless you have a hell of a lot of money. He gets paid, win or lose. If he loses you money, is he going to refund what you paid him? Ask him that; see what he says.
7) Because the goal of all this is to make money. Not to get a false sense of security because you can say to yourself, "I have a stockbroker." To make money. Nothing else matters and nothing can get in the way. You should do what will make you the most money consistent with your risk tolerance and investment horizon. An index ETF is about the most unsexy, unexciting way to do that. It's also the one for the people: those who don't know C from BAC and don't want to.
I cannot think of a single category or class of person for whom a full-service broker is suitable, for the same reason I cannot think of a single reason I would want to use an electric typewriter if a word processor were available. The rise of the discount broker has destroyed the raison d'etre of the full-service broker. If you can find one who will give you back his commissions if he loses you money, hire him. Otherwise, no.
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Quote:
Originally Posted by j_k_k
A full-service broker is approximately the worst possible way to go about it.
this is very true !!
Get educated and know your objectives so you can weed through the fluff. No one cares about your money but you. 30 yrs ago I used full service broker and it was pitiful, knowing what they did with my $$$. They just generated a lot of commissions for themselves.
There are SO MANY better options, and much ez'r on the pocket book and psyche.
Find a "bloomberg" business radio station and listen up. Or get on 'Motley Fool' website and go to 'Fools School' in the comfort of your living room, or get a Vanguard Mutual Fund acct. ... don't be overwhelmed. Keep it simple, be consistent, re-evaluate and re-balance occasionally, but judiciously.
A full-service broker is approximately the worst possible way to go about it.
I agree.
You may get a broker, but you and he are NOT a team.
He will NOT be working for you, or for your best interests.
He works for his company, and will do what his employers tell him to do.
I have known men who had full-service brokers, I have done their taxes and seen their portfolios. Those men, generally would have done better to have hung a newspaper on a wall and thrown darts at it, to decide what to buy.
I can only add this to the excellent above posts (jkk way to go!) that the online discount brokerage's websites are very user friendly and informative. Subjects are well-laid out and investment products are explained keeping risk tolerance in mind.
Also check out Morningstar for charts, stats, etc. Dont think the premium membership is worth it, though. Others may correct me if I'm wrong.
You are the best person to control your finances.
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